26 Feb 2015 Why We Don’t Believe Costco Chairman Jeffrey Brotman

Having ruffled the feathers of the leadership of Costco, America’s second largest retailer, last Friday, I plan to attend the 2015 Conservative Political Action Conference (CPAC) this Friday to respond to false claims made by Costco Chairman Jeffrey Brotman jointly to the National Center and the One American News Network regarding the National Center’s Employee Conscience Protection Project.

Brotman’s claims came in an email response to me as director of the National Center’s Free Enterprise Project and to Rick Amato, a One American News Network host, after repeated pressure from the National Center asking Costco to implement policies to protect its 100,000 employees from potential discipline for their private political and civic actions and personal beliefs.

The National Center’s request came following breaking news in April, when the CEO of Mozilla was forced from his job because he contributed $1,000 to a 2008 referendum defining marriage under California law. Colleagues at Mozilla held a different view and he lost his job.

Upon investigation, the National Center discovered that some corporations, such as Coca-Cola, had pledged to employees that they would not be fired or treated adversely at work because of personal, off-the-job legal political or civic activities, but most corporations had no such protections. Employees could be fired, demoted, denied promotions or raises because their supervisor disagreed with their politics or their views on policy issues, even if the issues in question had nothing to do with work.

The National Center began approaching CEOs of the latter companies to suggest they give their employees this protection and submitted shareholder proposals on the subject to nearly two dozen corporations.

Most of the corporations the National Center approached were very willing, and made formal changes to give their workforce freedom of conscience protections. These firms included, but are not limited to, General Electric, PepsiCo and Visa. But Costco not only refused to protect its workforce, but also fought back before the Securities and Exchange Commission (SEC), winning the support of that Obama Administration agency and blocking the shareholder proposal (which sought only a non-binding recommendation from shareholders to management) from even being placed before Costco shareholders.

Costco is an outlier from our experience. Most corporations we approached understood the inherent value in a workforce that is free to engage the political arena as the workers see fit without the fear of on-the-job reprisal and many have amended their policies to reflect this belief. Costco has claimed that top management will protect its entire workforce from such potential discrimination, but its policies do not bear this out, and, so far, the company’s management has spent considerable time and resources fighting any such policy change.

After I appeared on Rick Amato’s s February 17 broadcast to highlight Costco’s unwillingness to amend its corporate policies and Rick called on viewers let Costco know their views, Costco Chairman Jeffrey Brotman emailed Rick and I in an effort to refute the story.

In his email, Brotman claimed Costco already protects its workers from retaliation if they hold private political or civic views differing from those of their supervisors, and does so in the manner the National Center seeks. This is incorrect, or at the very least, Costco has repeatedly failed to provide evidence that it is correct.

In his email, Brotman wrote:

The suggestion that Costco “has retained the right to fire its employees for their private political actions” is simply false, and we disclaim any such right. Our Employee Agreement, which governs the rights and responsibilities of all our employees, contains a long list of protected characteristics, including “race, color, national origin, ancestry, sex, sexual orientation, gender identity or expression, religion, age, pregnancy, disability, work-related injury, covered veteran status, political ideology, genetic information, marital status, or any other factor that the law protects from employment discrimination.”

Brotman’s email went on to claim that Costco employees are also barred from harassing others based on these protected characteristics.

What Brotman’s email left out is more telling than what it included. He failed to mention that Costco’s Employment Agreement bars employees from engaging in any ‘unlawful’ discrimination. That distinction is very important since 50 percent of Americans live in a jurisdiction in which political discrimination is perfectly legal. In those locations, an employer or supervisor can terminate someone simply for disagreeing with him politically and that employee would have no legal recourse. And this includes many locations that have Costco stores.

It means nothing to say that Costco will bar its employees from engaging in unlawful discrimination. It doesn’t have the right to allow its employees to break the law. What we are doing through the Employee Conscience Protection Project is asking companies to go above and beyond what the law requires and to protect all of their workers no matter where they happen to be situated.

Furthermore, Brotman’s email seems to make the claim that Costco has substantially implemented the National Center’s proposal. That simply isn’t true. Costco’s legal team had the opportunity to make this claim when it petitioned the SEC for the legal right to remove our resolution from its proxy statement. It chose not to do so. After reviewing the evidence from Brotman’s email, which clearly shows Costco’s policies do not match our employee protection request, it is clear why Costco’s legal team declined to advance this argument.

To read the full legal exchanges between the National Center and Costco regarding exclusion of the shareholder proposal in which the SEC determined that protecting workers from political discrimination is an interference with ordinary business operations, click here and here. To read a press release about my initial confrontation with Brotman at the 2015 annual meeting of Costco shareholders, click here.

These false assertions by Brotman raise some other interesting legal questions. Under the Sarbanes-Oxley financial reform law, executives who sign financial reports and internal controls must certify the validity of the content in those documents. Falsely certifying documents is punishable by fines and potential prison time. While it is unlikely that a federal prosecutor would deem Brotman’s email to be actionable under Sarbanes-Oxley, it is worth noting that a false statement in such a correspondence seems to, at a minimum, violate the spirit of the law.

I also responded to Brotman’s email on the February 20 broadcast of The Rick Amato Show.

Through corporate activism, the National Center’s Employee Conscience Protection Project has successfully ushered in new protections for hundreds of thousands of American workers from potential political discrimination. And since it was announced earlier this month, the project has received significant media attention, including coverage by the San Francisco Chronicle, Politico, the Daily Caller and, obviously, The Rick Amato Show.